A comparative analysis of their performance
and stock evaluation
The purpose of this report is to compare Dell Inc. and Hewlett-Packard Co.; their backgrounds, their financial strength, and the trends of their stock portfolios. Both companies exhibited similarities, not only in their field, but also their performance over the last several weeks. After analyzing the two companies one stands ahead of the other, and those findings are laid out throughout this report. Let’s start by taking a look into each of the company’s backgrounds. Dell Inc. – Dell was founded in 1984 by Michael Dell. With only $1,000 he immediately started making waves in the technological industry. In just 2 years Dell already had the industry's fastest performing PC — a 12MHz, 286-based system. In 1988 Dell decided to go public and the following year they released their first laptop computer. In 1992 Dell finds itself on the Fortune 500 for the first time, making Michael Dell the youngest CEO to accomplish this feat. The 1990’s continue to be successful for the company, ending the decade #1 in PCs in the U.S., #1 worldwide in PCs for large and medium businesses and #1 in worldwide workstation shipments. Then on February 5th, 2013 Dell announced that Michael S Dell and Silver Lake would acquire the company. Today the company employs over 108,000 full time employees, has 2013 first quarter revenue of over $14 billion, and profits of over $3 billion (Dell Inc. Company History, n.d., Dell Inc. Company Profile, n.d.). Hewlett-Packard Co. – Hewlett-Packard was started in 1938 by friends Bill Hewlett and Dave Packard. Much like Michael Dell they started with just over $500, but turned that into one of the largest technological companies in the world. HP didn’t introduce their first computer until almost 30 years later when in 1966 they unveiled their first computer, the HP 2116A. Throughout the 1970’s and 1980’s HP produced some of the first programmable calculators, mainframes, and printers. It was these innovative achievements early on that allowed them to become the world’s largest PC vendor as of 2012. Like Dell, Hewlett-Packard has spent time on the Fortune 500 list, its highest ranking being 9th in 2009. Another thing that HP shared with Dell was a bidding war for 3PAR in 2010 (which Hewlett Packard eventually won). Today HP employs over 331,000 full time employees, has 2013 first quarter revenue of over $28 billion, and profits of over $6 billion (HPQ Company History, n.d., HPQ Company Profile, n.d.). When comparing two companies not only is it important to know where they’ve come from and where they are, but it is also important to know their financial strength. A company may have built itself up with innovative ideas, strong core values, and a great recognition in their field, but if they don’t have the financials to back everything up then they will not survive. Outlined below are 5 key ratios, based on 2013 first quarter data (when available. 2012 data used otherwise), for each company. | Dell Inc.| Hewlett-Packard Co.|
Current Ratio| 1.19| 1.11|
Activity Ratio| 10.28| 4.47|
Profitability RatioOperating Profit MarginNet Profit Margin| 4.8%3.7%| 5.5%4.3%| Leverage Ratio| .60| .62|
Coverage Ratio| 23.20| -12.62|
Figure 1. Ratio Analysis of Dell and Hewlett-Packard. This figure shows a ratio comparison between each company. As seen in Figure 1, these two companies are not only very similar to each other, but they both have favorable ratios. This is probably a big part in why both companies are so successful and lead the field of technological firms (Dell Income Statement, 2013; Dell Balance Sheet, 2013; HPQ Income Statement, 2013; HPQ Balance Sheet, 2013). Here is a closer look at each ratio and what it means and how each company stacks up to each other: According to Mayo (2007) the current ratio measures a company’s current assets over its current liabilities. A...